Last fall, Harkin released a report that his office claimed detailed a host of transgressions on the part of for-profit or “career” colleges from misuse of student loan money to misleading counseling services and high default rates among graduates. The report was criticized by Senate Republicans as “unfair,” and Republicans boycotted subsequent hearings. It was later revealed that the report, compiled – with Harkin’s help – by the GAO, was faulty and many of its findings either fabricated or unusable and the GAO issued fix:

In November 2010, the GAO was forced to release a significantly changed report. The correction affected 16 of the 28 findings in the original report. The bias of the original report was also reflected in the fact that all 16 revisions were all of the same type: changing flawed statements that cast the for-profits in the worst possible light. Error after error took statements out of context or did not accurately portray what was said.

The report, however, had Harkin’s desired effect. Just days after the report was presented at a Senate hearing, the value of for-profit schools’ stock dropped 14% and companies that ran free-market educational facilities lost over $4 billion dollars.

A later journalistic  investigation revealed an even darker heart to the study. The website Daily Caller obtained a series of emails and memos detailing how Harkin and his staff had pressured the GAO, demanding the inclusion of detail after detail even after the deadline to the report drew close. One staffer even explained that these detail demands were heavily responsible for the GAO reports gross innaccuracies:

“The team’s unwillingness to say no to the additional insertion of details at the end of a job created some of our most obvious inaccuracies,” the email says, citing pressure internally at GAO for the inclusion of these “details” as well as from “stakeholders” and “congressional staffers.”…

The internal evaluation email says one specific “detail” demand in particular drove “most of our corrections.” The detail was a summary of how many schools made deceptive claims about graduation rates and accreditation questions in the form of “X of 15 schools,” the email says.

When asked about the emails and messages, Harkin couldn’t remember the time frames and denied having influence over the report. Later investigations, though, showed that not only had Harkin had a significant hand in altering the report, but that his staff may have been involved in coaching the testimony of a key witness after one person who testified in front of Congress was unable or unwilling to give them the testimony they were looking for without “help” from outside special interests.

Top aides to Iowa Democratic Sen. Tom Harkin collaborated with a special interest group and a law firm with a financial stake in the matter to edit the written and oral testimony of a witness at a key investigative hearing last year, ….Officials from The Institute for College Access & Success (TICAS) and the James, Hoyer, Newcomer & Smiljanich law firm edited Josh Pruyn’s testimony for a pivotal Aug. 4, 2010 hearing before the Senate Health, Education, Labor and Pensions Committee (HELP), as did Harkin aides.

Pruyn, a disillusioned former employee of the for-profit Westwood College online, testified about high-pressure sales tactics used to enroll new students at the school. But ethics experts say the involvement of outside groups undermines the credibility of his testimony.

And that’s not even the end. While preparing to make his claims against for-profit education, Harkin met with noted short seller Steve Eisman who had an interest in seeing for-profit education stocks decline and participated in and shared his thoughts on for-profit education with $10K-per head meetings with groups of investment bankers with a history of short-selling entire industries. Industry analysts later reported to Inside Higher Ed that these meetings brokered important relationships between Harkin and investment companies whose clients would be well served by documents Harkin could produce from for-profit colleges through his own investigations and from actions Harkin could take to regulate or control the for-profit education industry.

So, of course, given these circumstances, is anyone willing to trust Harkin’s next “blockbuster report” due out any day purporting to eviscerate the for-profit education industry once again?

The Obama Administration certainly followed Harkin’s lead in approving a host of rules that restrict the for-profit education industry, even when they failed to address similar (and sometimes more egregious) shortcomings in not-for-profit and public education, despite all of the red flags. Since the Administration is so willing to simply rubber stamp the “findings” of a Senator who looks to be serving the needs of investment bankers rather than the American people, perhaps its time that the public put a more watchful eye on education policy coming out of this White House.

From Business Insider:

The group analyzed 29 different retail and service sectors in the U.S., finding that the annual cost of running business would balloon by $201 million and cause companies to shed at least 4,300 jobs.

The added costs come from adjustments such as adding new cash registers to hold the hefty coins, changing counting machines, purchasing larger safes and the costs incurred by banks, money transfer companies and financial firms, the study says.

“Changing to a coin would be a tax increase on retail and service firms of all sizes,” said John Dunham, president of John Dunham & Associates.

The debate is sure to continue on whether such a change and its potential to save the nation cash in the long-run is worth the initial hassle.

But it appears the public so far has spoken: More than 70 percent of consumers in a recent poll said they were against the proposal.

Supporters of the dollar coin, led by Arizona Rep. David Schweikert, cite a March 2011 GAO report as support for the contention that the switch would save money in the long run (over a 30-year period).  However, the study debunks that assumption as well, highlighting two key missing elements from the report:

• The economic model employed in the GAO’s analysis only considered costs and benefits to the federal government and ignored the effects of the policy change on the larger society – i.e., the general public and businesses. The GAO did not take into account the effects on the private sector from replacing the dollar bill with a dollar coin.

• The cost savings cited in the report are a gimmick. What the GAO report counted as the benefit of replacing the one dollar note does not result from traditional cost savings – i.e., a longer lifespan. Indeed, as the GAO report admits, “The cost of producing coins for a full replacement is never fully recovered during the 30-year analysis.” Instead, the purported benefit results from the assumed ability of the federal government to replace the existing stock of $1 notes with 50 percent more $1 coins and count the difference as revenue – basically an accounting trick.

Wait, government officials and politicians are narrowly focusing on government alone while forgetting about that pesky private sector that employs most Americans?  Color us shocked. It may not be a departure from the normal Washington tunnel vision, but the super committee was supposed to get serious about making meaningful spending cuts.  If this is an example of their handiwork, it seems doubtful they will hit their $1.5 billion target.

The latest federal subsidy comes under the little-known Small Community Air Service Development Program (SCASDP), which provides temporary help to small airports to attract and maintain local air service through marketing and revenue guarantees. St. Cloud officials said the taxpayer gift would go a long way toward courting a new carrier, mostly by offsetting the financial risks involved with getting new service off the ground. In other words, the federal government is subsidizing the airport so the airport can subsidize the airlines. “One hundred percent of it will go towards what we call a minimum revenue guarantee. It’s really putting a pot of money somewhere set aside that in the event that airline loses money or has some start up costs or whatever it might be that they’re able to pull from that and make themselves whole,” airport director Bill Towle told the St. Cloud Times.

While increasing St. Cloud’s chances of attracting air service, analysis by the Freedom Foundation of Minnesota suggests the program fails to deliver for communities more often than not. In fact, a federal audit found that half of SCASDP grants failed to meet their objectives or failed to continue to provide air service capable of competing in the marketplace after the subsidies dried up.

Federal auditors have consistently raised questions about the overall lack of effectiveness of the $20 million per year FAA program. An Office of Inspector General 2008 audit revealed that just 30 percent of subsidy recipients were successful in achieving and sustaining their desired results for at least one year. The 40-page report concluded that “70 percent of the grants in our review failed to fully achieve their objectives. Specifically, 50 percent of the grants were unable to achieve any of their articulated grant objectives or were unable to sustain grant benefits beyond the grant horizon.”

On paper, St. Cloud’s bid appears to align well with the audit’s recommendations for maximizing the possibility of success. Airports that woo new air service tend to fare better than airports that attempt to improve an existing air service, according to the audit. Other important variables include offering revenue guarantees, marketing support and high level community involvement.

While there are no guarantees, St. Cloud’s strategy includes all of those key elements, including raising additional financial support from the community. Nevertheless, the decade-old program has been excluded from the FAA Reauthorization bill working through Congress. The subsidy is destined to become a rare example of a Washington program that both sides of the aisle agree does not work, according to House Transportation and Aviation Committee staff in Washington.

In the end, St. Cloud will have secured one of the program’s first and last taxpayer gifts from the SCASDP. FAA records indicate that a $1,000,000 grant was awarded jointly in 2002 to Brainerd/St. Cloud airports during the first round of SCASDP funding. The records do not specify exactly how the subsidy was used to pursue the program’s mission of supporting and sustaining long-term air passenger service after federal funding runs out. A 2005 Government Accountability Office (GAO) report found that $250,000 of the first grant was reimbursed to the federal government. Neither federal DOT nor Brainerd and St. Cloud airport officials responded to FFM’s requests for information.

In fact, three more Minnesota airports received subsidies during the program’s decade-long existence: Duluth in 2003 ($1 million), Hibbing in 2005 ($485,000) and  Marshall in 2005 ($480,000). The Hibbing Airport even received special designation in 2005 under SCASDP as an Air Service Development Zone. GAO investigators, however, could not even determine what qualified an airport for Air Service Development Zone status or any actual benefits tied to the designation.

One official from an unspecified airport told the GAO that “positive local publicity for the airport” was the only effect they could report in connection with the designation. As for Minnesota’s five recipients of SCASDP grants, only Duluth currently offers non-subsidized passenger airline service. Marshall and St. Cloud do not have regular passenger air service, while Delta has tentatively announced plans to drop its subsidized flights to Hibbing and Brainerd.

The numbers in chart form are listed below:

SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM

MN Grant Recipients 2002-2011

2002- Brainerd/St. Cloud   $1,000,000
2003- Duluth                              1 ,000,000
2005- Hibbing                                 485,000
2005- Marshall                               480,000
2011- St. Cloud                               750,000

But while this ought to be an abject embarrassment for the dirigistes in the Obama administration, there’s a much bigger story behind the Solyndra scandal. It involves a concerted effort by White House officials to improperly rush the Solyndra loan decision for political reasons.

The Washington Post had the exclusive story:

The Obama White House tried to rush federal reviewers for a decision on a nearly half-billion-dollar loan to the solar-panel manufacturer Solyndra so Vice President Biden could announce the approval at a September 2009 groundbreaking for the company’s factory, newly obtained e-mails show.

The Silicon Valley company, a centerpiece in President Obama’s initiative to develop clean energy technologies, had been tentatively approved for the loan by the Energy Department but was awaiting a final financial review by the Office of Management and Budget.

The August 2009 e-mails, released exclusively to The Washington Post, show White House officials repeatedly asking OMB reviewers when they would be able to decide on the federal loan and noting a looming press event at which they planned to announce the deal. In response, OMB officials expressed concern that they were being rushed to approve the company’s project without adequate time to assess the risk to taxpayers, according to information provided by Republican congressional investigators.

The Post goes on to detail some of these email messages. Here’s one of them:

“We have ended up with a situation of having to do rushed approvals on a couple of occasions (and we are worried about Solyndra at the end of the week),” one official wrote. That Aug. 31, 2009, message, written by a senior OMB staffer and sent to Terrell P. McSweeny, Biden’s domestic policy adviser, concluded, “We would prefer to have sufficient time to do our due diligence reviews.”

Now here’s where mere incompetence turns into corruption. Want to guess the name of Solyndra’s biggest financial backer? Tulsa billionaire and Obama fundraiser George Kaiser.

So, in sum, the Obama administration rushed through a half billion dollar bailout loan to a now bankrupt alternative energy company bankrolled by one of Barack Obama’s top campaign fundraisers!

But wait, there’s more.

The Washington Post article coincides, not coincidentally, with a House Energy and Commerce Committee investigation and hearing last week that is exposing the Solyndra issue as a major scandal for this administration. While we appreciate Congress’ work, we think it is important that an independent investigation is conducted, free of politics, into this matter. Accordingly, Judicial Watch has launched a full investigation of its own. We’ve already submitted Freedom of Information Act (FOIA) requests to the Department of Energy (DOE), the Office of Management and Budget (OMB), the Treasury Department and the General Accounting Office (GAO) for records related to the loan guarantee, interagency communication regarding the loan and communications with Solyndra’s private financiers.

While JW’s probe is still in its early stages, here are a few things our experienced investigators have already dug up:

1. According to a July 2010 GAO report, “DOE’s implementation of the [loan guarantee] program has favored some applicants and disadvantaged others in a number of ways.” The GAO cites five companies DOE handed conditional financial commitments to before receiving reports from external reviewers. Solyndra was one of them.
2. Argonaut Ventures, LLC, controlled by Obama fundraiser Kaiser, owns 39% of Solyndra. Kaiser, the 64th richest person in the world, was an Obama campaign bundler who raised $50,000 for the Obama presidential campaign. He made no less than nine visits to the White House between March 12, 2009, and April 14, 2011, including a June 25, 2009, visit with Valerie Jarrett and former White House Chief of Staff Rahm Emanuel. A number of Solyndra officers have visited the Obama White House as well, including the company’s CEO. (Yet another example of why JW is fighting so hard in court (with great success) to obtain ALL Obama White House visitor logs which are so important.)
3. Solyndra was never close to solvent. According to a document filed by the company with the SEC on March 18, 2010: “We have incurred significant net losses since our inception, including a net loss of $114.1 million in fiscal 2007, $232.1 million in fiscal 2008 and $172.5 million in fiscal 2009, and we had an accumulated deficit of $557.7 million at January 2, 2010. We expect to continue to incur significant operating and net losses and negative cash flow from operations for the foreseeable future…”
4. The government’s interest rate on the Solyndra loan is significantly lower (at least 50% lower), than the interest rates given to other beneficiaries of DOE stimulus funds. For example Kahaku Wind Power received an interest rate of 3.406% from the federal government. Solyndra’s interest rates ranged between 1.025 to 1.515%.
5. During a February 2011 restructuring, the DOE weakened its creditor position to benefit Argonaut/Kaiser. According to Forbes: “As its finances deteriorated, Solyndra restructured its debt in February. Argonaut Ventures, which owns 38.99% of Solyndra, led a group that agreed to make a $75 million loan available in exchange for the right to be repaid first if the company failed. Next in line is the U.S. government – i.e. the taxpayers – who are owed the $527 million given to Solyndra to build the robotic assembly plant known as Fab 2.” But under the terms of loan agreement, the American taxpayers were, by law, first in line for repayment.

As I say, our investigation is ongoing. This is just the tip of the iceberg. For instance, there’s a recent report in the Post detailing how the Obama administration was more concerned about how it might look politically if Solyndra failed than about the possibility of outrageous losses to the American taxpayer.

I have a perspective that some hack Republicans may not like. The DOE loan guarantee program is authorized under a horrible law, the Energy Policy Act of 2005, signed by President George W. Bush with the support of most Republicans (and then-Senator Obama). This law came out of the secretive Cheney Energy Task Force, which in order to expose its inner-workings Judicial Watch famously took all the way to the United States Supreme Court. Our investigations did find that the Task Force was little more than a special interest bazaar through which environmentalists, companies and industries could make the case for government subsidies of their pet projects and concerns. So it was no surprise that the illegally secretive Task Force resulted in a law designed to dish taxpayer monies to favored corporations and interests. In my experience, corrupt and secretive government processes lead to corrupt and wasteful legislation. That is true with Obamacare and it is true with the Bush energy law.

So it is also no surprise that a committed socialist like Obama would happily use the Bush energy law’s provisions to spend billions to help companies like Solyndra. Judicial Watch took some flak from some of our conservative friends for opposing the Bush administration over this secret Task Force. The lesson out of all this for liberals who hate Bush and conservatives critical of Obama is that Big Government, Big Secrecy and Big Corruption walk together, hand in hand.

When questioned about their rationale for the bailouts (by Judicial Watch, the GAO and others), government officials simply repeat their standard line: There were “unusual and exigent circumstances” that warranted extreme measures.

Those extreme measures included the Federal Reserve authorizing credit to “troubled” private financial institutions. (Not since the Great Depression had the Fed authorized a loan to a non-banking entity.) If such measures were not taken, we were told, the institutions would collapse, thereby spreading a “contagion” throughout the global financial system.

This thin explanation is simply not good enough said the GAO. You can read the full report here. In my view, here are two key takeaways (as reported by CNBC):

1. In explaining the basis for these exceptional credit extensions, Federal Reserve Board officials cited the continuing strains in financial markets and concerns about the possible failures of these dealers at the time. However, the Federal Reserve Board could not provide documentation explaining why these extensions were provided specifically to affiliates of these four primary dealers.
2. …without more complete documentation, how assistance to these broker-dealer subsidiaries satisfied the statutory requirements for using this authority remains unclear. Moreover, without more complete public disclosure of the basis for these actions, these decisions may not be subject to an appropriate level of transparency and accountability.

On this subject of transparency, Judicial Watch has launched a comprehensive investigation of the government’s rationale for the bailouts on behalf of our client and former Federal Reserve employee Vern McKinley. We have a number of lawsuits related to the bailouts of Bear Stearns, AIG, Lehman Brothers, and others working their way through the system. And, in fact, on July 18, we filed a “Petition for Rehearing En Banc,” with the U.S. Court of Appeals for the District of Columbia Circuit in our lawsuit over the Bear Stearns bailout (McKinley v. Board of Governors of the Federal Reserve System, Case No. 10-5353).

Like the GAO, with this FOIA lawsuit Judicial Watch simply wants to know the Board of Governors of the Federal Reserve System’s justification for authorizing the Federal Reserve Bank of New York to provide “temporary emergency financing” to Bear Stearns through JP Morgan. (JW did learn from Treasury documents we unearthed that Bear Stearns was considered “worthless” at the time the Federal Reserve Bank of New York handed JP Morgan $30 billion to take over the company.)

The government is stonewalling our request, saying that information related to this question is protected under the “deliberative process privilege” of FOIA law (Exemption 5). As you might imagine, documents supposedly relating to the “deliberative process” can be most the most illuminating about government decision-making and whether it is on the up-and-up.

Unfortunately, an appellate court panel bought the government’s argument.

On June 3, 2011, the panel ruled that if a government agency simply makes the claim that information can be withheld under Exemption 5 the courts must assume that releasing the information will harm the agency’s decision making process – even if no proof of harm is put before the court.

Judicial Watch is now requesting that the appellate court hear the matter en banc (or in full, rather than merely a three-judge panel). Here’s a squib from our brief.

By substantially lowering the government’s burden of demonstrating that material may be withheld under the deliberative process privilege, the panel created a sweeping exemption that is in direct conflict with decades of decisions holding that material may be withheld under the deliberative process privilege only if a government agency demonstrates that disclosure of the withheld material would harm the agency’s decision-making process. [Emphasis added.]

Really this boils down to a very simple issue. We believe the American taxpayers deserve to know how and why the government committed trillions of dollars of their money to prop up failing financial institutions. But the government says it’s none of our business. (Just like the Obama administration says their debt ceiling “crisis” plans are none of our business either.) Unfortunately, if allowed to stand, the panel’s ruling could severely undermine FOIA law.

The government’s position on these bailout documents is offensive and corrupt. And we’re glad the GAO has called attention to that with its report.

You may have thought that Ted Stevens’ giant salmon of a private plane was the most spectacular fish-related waste of taxpayer dollars in history, but you’d be wrong. It turns out that the government’s handling of real fish -specifically, catfish – dwarfs that million-dollar monstrosity.

A special interest provision tacked onto the 2008 Farm Bill mandated that the USDA inspect all imported catfish.  Proponents, who unsurprisingly included those with a stake in the American catfish industry, cited safety concerns as the reason behind the program, patriotically claiming that protecting Americans from bad foreign catfish was as important, if notmore important than protecting them from foreign terror groups.

Unfortunately, their argument for a sort of “catfish TSA” doesn’t hold water. As it turns out, all catfish are already inspected by the FDA, so this second inspection would be superfluous at best and at worst, a complete waste of taxpayer funds. Second, catfish are actually low on the threat-level scale, labeled a “low-risk” food by both the CDC and – get this – the USDA itself.

You read that right.

There’s a provision asking for more cash for the USDA to double-inspect a fish the USDA don’t consider unsafe. These fish are more like foreign exchange students than al-Qaeda.

A post by the Taxpayer Protection Alliance’s David Williams details the Government Accountability Office’s (GAO) subsequent ruling that USDA oversight of catfish would result in regulatory overlap and fragmentation and lead to increased regulatory costs.

The price tag for U.S. taxpayers?  A minimum of $30 million per year.

You might be wondering if, like Ted Stevens’ giant flying salmon, whether the catfish boondoggle was snuck in under the radar and passed through the censors unnoticed. It turns out, though that two high-profile Senators John McCain and Tom Coburn, introduced legislation in early March to repeal the USDA catfish provision.  Calling it “nothing more than a protectionist tactic funded at taxpayers’ expense,” McCain exposed the program as just another earmark pushed by a few lawmakers’ regional interests. Shockingly, the repeal provision didn’t pass.

So next time you’re dining on a catfish special in a local restaurant, remember this: that ugly little fish with its weird bug eyes and slightly woodsy taste didn’t just cost you the $17.95 it’s listed for on the restaurant menu. It’s journey from a foreign market, through two government inspections, on special order by Congress, cost Americans nearly $30 million. Congress could have papered the walls of the Capitol with 24k grouper for half that.

Will they ever learn?

A report from the nonpartisan GAO, to be released Tuesday, compiles a list of redundant and potentially ineffective federal programs, and it could serve as a template for lawmakers in both parties as they move to cut federal spending and consolidate programs to reduce the deficit. Sen. Tom Coburn (R., Okla.), who pushed for the report, estimated it identifies between $100 billion and $200 billion in duplicative spending. The GAO didn’t put a specific figure on the spending overlap.

The GAO examined numerous federal agencies, including the departments of defense, agriculture and housing and urban development, and pointed to instances where different arms of the government should be coordinating or consolidating efforts to save taxpayers’ money.

The agency found 82 federal programs to improve teacher quality; 80 to help disadvantaged people with transportation; 47 for job training and employment; and 56 to help people understand finances, according to a draft of the report reviewed by The Wall Street Journal.

Instances of ineffective and unfocused federal programs can lead to a mishmash of occasionally arbitrary policies and rules, the report said. It recommends merging or consolidating a number of programs to both save money and make the government more efficient.

“Reducing or eliminating duplication, overlap, or fragmentation could potentially save billions of tax dollars annually and help agencies provide more efficient and effective services,” the report said.

Read the whole thing here. Full report below. Leftists would have you believe that government is so amazingly efficient that the very last dollar spent is the one keeping open national parks or employing a teacher. In reality, billions are lost each year to waste and inefficiency. Yes, we have to deal with entitlements, but we might as well start with this low-hanging fruit. I mean, if the GAO says we can cut programs and both save money and improve services, why wouldn’t we?

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